Tax Office defends delays

The tax industry and broader community didn’t appreciate how big a job it was to upgrade the Australian Taxation Office’s computer systems, said taxation commissioner Michael D’Ascenzo.

The delays caused by switching over millions of records last January – leading to about half a million taxpayers getting tax returns late – triggered an outcry from accountants and taxpayers when their refund cheques were delayed by weeks.

Tax agents were forced to repeatedly check the status of returns, follow up on delays and errors in paperwork, the National Institute of Accountants said. “This not only results in significant amounts of unpaid work but also does not allow tax agents to move on to other work," it said then.

The new computer systems are designed to make filing tax returns easier, reduce operational costs, and improve flexibility and the ability to handle changes.

AFR
AFR

Mr D’Ascenzo said the upgrade “turned out really well, notwithstanding the hype". The delay was a small price to pay.

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“I think the people didn’t understand," he said. “If you’re not involved in major systems changes, this is as big as they come.

“Two weeks’ delay in relation to a program that is bigger than anything else anyone has done around the world in the tax arena – and probably as big as the biggest global system changes in the world – you would die for that."

About 500,000 tax returns and 100,000 superannuation co-contributions were delayed due to the upgrade, which involved the transfer of 27 million taxpayer records, 32.5 million accounts and 282 million forms to a new system.

About 140,000 cheques were accidentally omitted from refund letters.

Angry tax agents complained that the delays reduced their cash flows. Tax agents are generally only paid after their clients receive their tax refund.

Mr D’Ascenzo said he had sleepless nights in January 2010 when the changeover occurred because it was a “real high risk issue".

“If the system collapsed there’s 32 million records of taxpayers that I don’t know how to reconstruct," he said.

“It was the right call as it turned out, but the downside risk was quite significant."

The upgrade of the income tax processing system was marred by cost blowouts. The original $445 million estimate expanded to $879 million.

It led to separate investigations by the Inspector-General of Taxation and Auditor-General. The Tax Office flagged in advance of the computer shutdown that it would temporarily stop processing tax returns and encouraged taxpayers and their advisers to lodge in January 2010 to avoid delays.

“I don’t think they were listening," Mr D’Ascenzo said. “You could argue we could have sent the message better, but I just don’t think when people don’t want to hear . . . it still wouldn’t have got through."